Question 1

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?

Accepted Answer

A)  MC = AVC 
B)  MC = AC 
C)  MC > AFC 
D)  All of the above. 
A)  MC = AVC 
B)  MC = AC 
C)  MC > AFC 
D)  All of the above.

Question 2

Suppose the cost of producing two goods,x and y,can be represented as C = ax + by + cxy.If there are economies of scope,then which of the following must be true?

Accepted Answer

A) c > 0 B) a + b = -c C) c = 0 D) c < 0 A) c > 0 B) a + b = -c C) c = 0 D) c < 0

Question 3

Which of the following is NOT a form of outsourcing?

Accepted Answer

A)  hiring an accountant to do your taxes 
B)  replacing the windshield wipers on your car 
C)  paying your son to mow the lawn 
D)  taking a taxi to the airport 
A)  hiring an accountant to do your taxes 
B)  replacing the windshield wipers on your car 
C)  paying your son to mow the lawn 
D)  taking a taxi to the airport

Question 4

If the isoquants are straight lines or L-shaped,then a cost-minimizing firm will

Accepted Answer

A)  not be able to minimize costs. 
B)  find the lowest isocost line touching the relevant isoquant. 
C)  find the highest isocost line touching the relevant isoquant. 
D)  choose not to produce any output. 
A)  not be able to minimize costs. 
B)  find the lowest isocost line touching the relevant isoquant. 
C)  find the highest isocost line touching the relevant isoquant. 
D)  choose not to produce any output.

Question 5

Four years after graduating from college you must decide if you want to go on as an accountant (your college major)or if you want to make a career change and become a singer.The cost of your education will matter for your decision.

Accepted Answer

A) True 
 B)False

Question 6

Fixed costs

Accepted Answer

A)  are always sunk. 
B)  are avoidable. 
C)  are sometimes sunk. 
D)  sunk in the short run, but not in the long run. 
A)  are always sunk. 
B)  are avoidable. 
C)  are sometimes sunk. 
D)  sunk in the short run, but not in the long run.

Question 7

Why do many people choose to not read the manuals included with their new computer?

Accepted Answer

A)  They perceive that learning by doing decreases costs faster than learning by reading. 
B)  They perceive that learning by doing is more enjoyable than learning by reading. 
C)  They perceive that learning by reading is not sophisticated. 
D)  They perceive that learning by doing is better than learning by reading. 
A)  They perceive that learning by doing decreases costs faster than learning by reading. 
B)  They perceive that learning by doing is more enjoyable than learning by reading. 
C)  They perceive that learning by reading is not sophisticated. 
D)  They perceive that learning by doing is better than learning by reading.

Question 8

Isocost lines

Accepted Answer

A)  are dependent upon the technical efficiency of the production function. 
B)  are dependent upon the quantity of goods a firm wants to produce. 
C)  are dependent upon the costs of a firm's inputs. 
D)  are the same as budget lines. 
A)  are dependent upon the technical efficiency of the production function. 
B)  are dependent upon the quantity of goods a firm wants to produce. 
C)  are dependent upon the costs of a firm's inputs. 
D)  are the same as budget lines.

Question 9

Manisha could work for another firm making $10,000 per month,but she decides to open her own gourmet cheese store and pay herself $2,000 per month.In her first month of operations,she spends $6,000 on cheese,$1,000 on other items,and $2,500 on rent.She had a great opening month,and brought in revenues of $14,500.What are Manisha's economic profits?

Accepted Answer

A)  $3,000 
B)  $4,000 
C)  -$5,000 
D)  -$6,000 
A)  $3,000 
B)  $4,000 
C)  -$5,000 
D)  -$6,000

Question 10

Isocost lines

Accepted Answer

A)  represent the combinations of inputs that have the same marginal cost. 
B)  represent the combinations of inputs that have the same total cost. 
C)  are the inverse of the isoquant lines. 
D)  represent supply and demand for inputs at a given cost. 
A)  represent the combinations of inputs that have the same marginal cost. 
B)  represent the combinations of inputs that have the same total cost. 
C)  are the inverse of the isoquant lines. 
D)  represent supply and demand for inputs at a given cost.

Question 11

Average variable cost (AVC)

Accepted Answer

A)  always increases with increased output. 
B)  always decreases with increased output. 
C)  are always flat. 
D)  may either increase, decrease, or remain flat with increased output. 
A)  always increases with increased output. 
B)  always decreases with increased output. 
C)  are always flat. 
D)  may either increase, decrease, or remain flat with increased output.

Question 12

The slope of the isoquant tells the firm how much

Accepted Answer

A)  output increases when labor increases by one unit. 
B)  output increases when capital and labor are doubled. 
C)  capital must decrease to keep output constant when labor increases by one unit. 
D)  a unit of capital costs relative to the cost of labor. 
A)  output increases when labor increases by one unit. 
B)  output increases when capital and labor are doubled. 
C)  capital must decrease to keep output constant when labor increases by one unit. 
D)  a unit of capital costs relative to the cost of labor.

Question 13

Average variable cost (AVC)

Accepted Answer

A)  is the variable cost divided by the average sales price of the final good. 
B)  is the variable cost divided by the quantity of output produced. 
C)  is equal to average fixed cost (AF
C)  when no output is produced. 
D)  is always less than average fixed cost (AF
C) . 
A)  is the variable cost divided by the average sales price of the final good. 
B)  is the variable cost divided by the quantity of output produced. 
C)  is equal to average fixed cost (AF
C)  when no output is produced. 
D)  is always less than average fixed cost (AF
C) .

Question 14

One problem with measuring a durable good's cost is

Accepted Answer

A)  how to account for depreciation of the good. 
B)  how to handle the cost if the value changes over time. 
C)  that the good may break before the end of its estimated useful life. 
D)  when to decide to throw it away for a newer model even if the cost has not been accounted for. 
A)  how to account for depreciation of the good. 
B)  how to handle the cost if the value changes over time. 
C)  that the good may break before the end of its estimated useful life. 
D)  when to decide to throw it away for a newer model even if the cost has not been accounted for.

Question 15

Learning by doing is represented by

Accepted Answer

A)  a decrease in the average total cost curve. 
B)  an increase in the average total cost curve. 
C)  no change in the average total cost curve. 
D)  an increase in the average total cost curve and a decrease in the marginal cost curve. 
A)  a decrease in the average total cost curve. 
B)  an increase in the average total cost curve. 
C)  no change in the average total cost curve. 
D)  an increase in the average total cost curve and a decrease in the marginal cost curve.

Question 16

A sunk cost is

Accepted Answer

A)  the cost for drilling certain types of wells, such as a well for water. 
B)  a past cost that cannot be recovered. 
C)  a cost that is highly relevant for decision-making. 
D)  an opportunity cost. 
A)  the cost for drilling certain types of wells, such as a well for water. 
B)  a past cost that cannot be recovered. 
C)  a cost that is highly relevant for decision-making. 
D)  an opportunity cost.

Question 17

A specific tax of $1 per unit of output will affect a firm's

Accepted Answer

A)  average total cost, average variable cost, average fixed cost, and marginal cost. 
B)  average total cost, average variable cost, and average fixed cost. 
C)  average total cost, average variable cost, and marginal cost. 
D)  marginal cost only. 
A)  average total cost, average variable cost, average fixed cost, and marginal cost. 
B)  average total cost, average variable cost, and average fixed cost. 
C)  average total cost, average variable cost, and marginal cost. 
D)  marginal cost only.

Question 18

An old friend takes you out to dinner and pays for your meal.Which of the following best represents your opportunity cost?

Accepted Answer

A)  going to the beach 
B)  attending a concert 
C)  studying for your next microeconomics exam 
D)  Unable to determine with the information given. 
A)  going to the beach 
B)  attending a concert 
C)  studying for your next microeconomics exam 
D)  Unable to determine with the information given.

Question 19

Average fixed cost (AFC)

Accepted Answer

A)  is the fixed cost divided by the average sales price of the final good. 
B)  is the fixed cost divided by the quantity of output produced. 
C)  is $0 when no output is produced. 
D)  is always less than average variable cost (AV
C) . 
A)  is the fixed cost divided by the average sales price of the final good. 
B)  is the fixed cost divided by the quantity of output produced. 
C)  is $0 when no output is produced. 
D)  is always less than average variable cost (AV
C) .

Question 20

If average cost is decreasing

Accepted Answer

A)  marginal cost equals average cost. 
B)  marginal cost exceeds average cost. 
C)  marginal cost is less than average cost. 
D)  Not enough information is given. 
A)  marginal cost equals average cost. 
B)  marginal cost exceeds average cost. 
C)  marginal cost is less than average cost. 
D)  Not enough information is given.

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?

Suppose the cost of producing two goods,x and y,can be represented as C = ax + by + cxy.If there are economies of scope,then which of the following must be true?

Which of the following is NOT a form of outsourcing?

If the isoquants are straight lines or L-shaped,then a cost-minimizing firm will

Four years after graduating from college you must decide if you want to go on as an accountant (your college major)or if you want to make a career change and become a singer.The cost of your education will matter for your decision.

Fixed costs

Why do many people choose to not read the manuals included with their new computer?

Isocost lines

Isocost lines

Average variable cost (AVC)

The slope of the isoquant tells the firm how much

Average variable cost (AVC)

One problem with measuring a durable good's cost is

Learning by doing is represented by

A sunk cost is

A specific tax of $1 per unit of output will affect a firm's

An old friend takes you out to dinner and pays for your meal.Which of the following best represents your opportunity cost?

Average fixed cost (AFC)

If average cost is decreasing

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 6: Costs

Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q.Which of the following statements is TRUE at all levels of production?

Suppose the cost of producing two goods,x and y,can be represented as C = ax + by + cxy.If there are economies of scope,then which of the following must be true?

Which of the following is NOT a form of outsourcing?

If the isoquants are straight lines or L-shaped,then a cost-minimizing firm will

Four years after graduating from college you must decide if you want to go on as an accountant (your college major)or if you want to make a career change and become a singer.The cost of your education will matter for your decision.

Fixed costs

Why do many people choose to not read the manuals included with their new computer?

Isocost lines

Isocost lines

Average variable cost (AVC)

The slope of the isoquant tells the firm how much

Average variable cost (AVC)

One problem with measuring a durable good's cost is

Learning by doing is represented by

A sunk cost is

A specific tax of $1 per unit of output will affect a firm's

An old friend takes you out to dinner and pays for your meal.Which of the following best represents your opportunity cost?

Average fixed cost (AFC)

If average cost is decreasing

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Firm Organization and Market Structure

Competitive Firms and Markets

Monopoly

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters